Social sites, whether they are discovery platforms, blogs, or forums, are tight knit communities built on trust. These communities can understandably be sensitive to advertising.

However, even the most buzz-worthy social media darlings need revenue to fuel their growth and help fund administration, support and development. Without revenue (or the potential of revenue for investors), there would be no community.

Luckily, monetization efforts don’t have to be at odds with your user base. If you implement your monetization strategy with care, it’s possible to maximize revenue potential and keep members happy. My personal concern with this problem led me to found Skimlinks, so this is an area near and dear to my heart.

Whether you use sponsorships, ads, affiliate marketing, premium memberships or a combination of these strategies, the following tips will help you monetize your forum or social site.

1. Disclose

Let members know about your monetization plans before you roll them out, so no one is caught off guard. It’s best to explain why you’re doing this, i.e. “we need to earn enough in order to provide all the services people enjoy now and add even more down the road.”

Disclosure is often required to comply with FTC guidelines that state: “The post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement.” Whether you’re legally obligated or not, full transparency is the nice thing to do, and it will help you maintain the goodwill you’ve worked hard to build.

At a minimum, include disclosure text in the “About us” or “Privacy” section of your site. Even better, add a link in the footer or navigation bar to a dedicated disclosure page or acknowledgement of monetization. For example, NPR.org explains that the links on their shopping site are affiliate links and that the money they make from these links helps fund their service.

2. Don’t intrude on the user experience

While ads may play a role in your business plan, be sure to think about how intrusive monetization schemes, such as glaring ads, will impact the aesthetic of your site and ultimately your user experience. If possible, try to place relevant ads so that they add to the experience, rather than take away.

Google AdWords is a good model. Sponsored links appear next to Google search results. Ads are related to the searches taking place, so they are often of interest to users. Because of this, people aren’t as bothered by the ads, and they’re more likely to click and make a purchase. This creates a win-win solution for Google and a business model that pays them big time — 96 percent of Google’s $37.9 billion in revenue in 2011 came from advertising.

If you choose to monetize in a way that complements the style of your site, you should be in good shape. Facebook has done very well with a clean interface and ads that are more social in nature. Contrast this to MySpace, which was a bit chaotic and overwhelming in their ad presentation.

When implemented thoughtfully, affiliate marketing can be a win-win-win for the marketplace, with sites making money from content, merchants making money from sales, and consumers finding new products, as well as enjoying free services with minimal intrusion.

3. Consider rolling out changes gradually

If you sense that your community is particularly sensitive to advertising, introduce it in stages and test it first with different groups.

By implementing your monetization strategy in stages, you can monitor user reactions and identify any issues prior to a full-scale launch. Creative solutions include using only affiliated links and showing ads to non-logged in users, or perhaps only doing so on older posts.

When you roll monetization to a wider community base, encourage users to give constructive feedback, both positive and negative. Then tweak settings as necessary. If you’re monetizing a forum, make sure the moderators fully understand your plans and intentions ahead of time. When questions arise within the community, moderators can respond quickly and provide support for your decision to monetize.

4. Engage, but don’t react

Inevitably, a handful of users will be opposed to any monetization in the community, and it’s important to resist the temptation to react emotionally to a small number of complaints.

Instead, inform your community that you are actively listening to all their feedback and reiterate the importance of monetization to your ability to provide — and enhance — the services they love. Be careful to not let a tiny but vocal handful of individuals affect your company’s decisions.

5. Let members opt out

If applicable or possible, you should allow members to opt out of certain monetization programs. For example, if you’re using affiliate links in your community, give members the ability to disable links if they prefer. Announce this capability to everyone in your disclosure or privately communicate it to members with complaints.

Often, it’s only a handful of members who object to monetization and giving them an opportunity to opt out can diffuse potential issues. At the end of the day, monetization — whether by advertising, affiliate marketing, or subscription fees — is the only way a site can afford to provide peoples’ favorite services.

If you roll out a solution that allows you to monetize without changing the user experience or compromising editorial integrity, your community will likely accept your decision — as long as you keep them in the loop.

Alicia Navarro is CEO and co-founder of Skimlinks. She tweets at @AliciaNavarro.

]]>The take-down of MegaUpload continues to make waves, with a number of similar file-sharing sites either shutting down or significantly altering their offerings. But the demise of services like UploadBox and x7.to doesn’t mean cloud file sharing is over; others are more than happy to fill these gaps.

Instead, it looks as if there will be a fundamental shift in how cloud file sharing providers do business. On the losing end will be a small, but thriving, pirate cottage industry.

MegaUpload stumbled over rewards

The indictment of MegaUpload alleged a number of illegal acts, including money laundering and active copyright infringement by the company’s executives, which tried to compete with YouTube by copying as many videos from the Google-owned site as possible. But one of the key accusations of the indictment involves MegaUpload’s affiliate program:

“For much of its operation, the Mega Conspiracy has offered an “Uploader Rewards” Program, which promised premium subscribers transfers of cash and other financial incentives to upload popular works, including copyrighted works, to computer servers under the Mega Conspiracy’s direct control and for the Conspiracy’s ultimate financial benefit…. In total, the Mega Conspiracy directly paid uploaders millions of dollars through online payments.”

MegaUpload’s affiliate program rewarded uploaders with free premium services and even cash if their files directed a lot of downloaders to the site. To be clear, most people didn’t get rich with the rewards: 10,000 downloads of your files simply got you a free one-month premium membership. However, users who brought the site 10 million downloads received $10,000 via Paypal.

The MegaUpload rewards program: $10,000 for 10MM downloads.

These kinds of rewards programs have long been a thorn in the eye of rights holders, who argue that the emphasis on high download numbers automatically pushes people to infringe and offer popular MP3s or movies for download. The MegaUpload indictment also suggests company executives had knowledge of their affiliates’ infringement, quoting from internal emails in which they discuss that some of the users offer MP3s, ripped DVDs and Vietnamese movies. One of the uploaders referenced in the indictment received more than $55,000 from MegaUpload.

How much hosts pay for traffic

MegaUpload introduced its rewards program in 2005, and the move was quickly copied by many other file hosters. The logic behind these affiliate deals was that the sites could easily monetize traffic. File hosters restricted download speeds and capabilities for non-paying users to the point where many simply gave in and purchased premium memberships. The indictment against MegaUpload alleges the site made more than $110 million via Paypal alone, and users unwilling to pay were further monetized through ads.

Not an easy way to get rich: One user's stats of affiliate earnings through a cloud hosting service.

Affiliate deals made sense for one-click-hosters, but they also led to an interesting cottage industry that was largely focusing on redistributing pirated works. Uploaders distribute their files to multiple hosts, then link to them on third-party sites that openly promise access to infringing content. They discuss the details of their trade on web forums specializing on affiliate relationships, and openly compare how much each and every host pays them for their traffic.

Browsing these forums offers a fascinating insight into an under-reported part of the file-sharing scene. Some of these uploaders only make pennies on the dollar, despite investing lots of time into posting files and promoting them in various places. Said one:

“I upload porn and I am only able to make about ($1) per day and I have my own blog, am posting in about 20 mega threads on 15 different forums and am posting around 15 different scenes a day.”

Others make even less, with one writing he hopes “to someday earn 1$/day or more.” But there is also the other end of the spectrum, with some uploaders making $1000 or more per month, and a few even clocking three-digit earnings per day.

From Hotline to MegaUpload

These kinds of pirate cottage industries aren’t entirely new. Even before the days of Napster, there was Hotline, a client-server protocol that allowed anyone to set up small file-swapping services on their own computer. Hotline admins regularly password-protected their servers, asking users to click on certain banner ads to receive a password. After Hotline’s demise, much of that activity shifted to BitTorrent and Edonkey2000, with some users running ad-heavy forums and others even password-protecting downloads in order to get people to click on their links

The emergence of cloud file hosters multiplied revenue opportunities, but the writing was quickly on the wall: The bigger file hosters have been shifting away from these kinds of rewards programs for a while. RapidShare stopped rewarding people for traffic two years ago, and a company spokesperson told me this week, “Such a system would be very effective advertising, but we concluded that it could increase abuse.”

MegaUpload apparently ended its own rewards program last summer, according to the indictment, but the criminal proceedings at the company were already underway at that point. Smaller competitors were eager to step in and pay users for uploading files, but the dramatic shut-down of MegaUpload has all but put an end to this practice.

]]>VigLink is launching today a service to help publishers take advantage of affiliate marketing offerings for sites they already link to in their normal course of writing. While many site owners may be aware that Amazon will send them a cut of revenue when they refer purchasers, just about every other e-commerce and subscription service — from The Gap to The Wall Street Journal — does, too. VigLink estimates that less than half of links that could be monetized are hooked up to affiliate programs.

The San Francisco-based company raised $800,000 in June in a (previously reported) round led by First Round Capital and Google Ventures and including Reid Hoffman, Deep Nishar, Niel Robertson, Hadi Partovi, Ali Partovi, Carlos Cashman and Micah Adler.

The thought behind VigLink is that in the course of regular writing, web publishers link to sites that they don’t know have affiliate programs. Rather than requiring bloggers to sign up for each program individually, VigLink serves as the middleman. The content creators receive payments after they reach a $25 minimum for all the affiliate programs combined (a much lower barrier to entry than if they had joined all of them individually). VigLink also maintains publishers’ links to make sure they hook up to current offerings.

Meanwhile, merchants are given the ability to track participating publishers and reject those whose content or audience they don’t feel is appropriate. Visitors probably won’t notice anything out of the ordinary as they read and click on links, unless they look very closely at the URL, said Viglink CEO Oliver Roup. His company, of course, takes a cut of any CPA revenue (and later may expand to CPC).

VigLink (which has a UK equivalent startup, Skimlinks) sent me a sample report showing that Gizmodo leaves approximately $4,400 per month on the table in unrealized income. That’s not based on a relationship with the site, but an estimate from crawling its outbound links, using public traffic estimates and applying a model of how many click-throughs the site is likely to get (see screenshot). VigLink says it already has relationships with sites that have a combined 100 million page views per month, but it’s not specifying which ones. It does not require a minimum amount of traffic to join the program.

My concern with VigLink would be that a taste of the revenue from linking to The Gap, for instance, might lead a normally interesting blogger to write about nothing but sweaters and khakis. We don’t really need any more link farms in the world. Roup said that VigLink will encourage participants to follow the FTC guidelines about paid blogging. He also noted that as compared to something like the double-underlined links from Kontera (which I personally find way too obtrusive), VigLink’s monetized links blend in with the rest of the text and the normal course of reading.

The next step for VigLink is to expand beyond people who publish their own sites and blogs to places like Twitter and Facebook where bevies of users trade links. Roup hinted that this was in the plans, and said that it’s actually already possible for sites like those to integrate with VigLink’s open API.

As a side note, I followed up with Rich Miner at Google Ventures because I was interested in the nature of the VigLink funding given the startup’s product is somewhat close to Google’s AdSense and it was one of Google Ventures’ first investments.

While both Miner and Roup said the overlap had been positive so far, Miner meanwhile relayed a cute story about how he met Roup — while judging a business plan competition at Harvard last year. “Something about him struck me,” Miner said, noting Roup majored in computer science at MIT and “perhaps looked a little scruffy compared to the other polished MBAs.” Roup didn’t win the competition but he did get the mentorship and eventually, funding.